The U.S. economy weakened more than initially reported in the July to September period. The latest downward revision in the gross domestic product is further evidence that the economy is contracting and thus in recession.
The U.S. commerce department says the economy shrank three times faster in the third quarter than initially reported. The 1.1 percent annual rate of decline is the steepest contraction in more than a decade. Most forecasters expect the decline will be even sharper in the current three-month period, which includes the critical Christmas buying season.
Steven East is an economist at Friedman Billings brokerage in suburban Washington. He is optimistic that the current recession will not go much deeper and will be over by March.
"I believe the Congress will pass a roughly $80 billion fiscal stimulus package by Christmas," he says. " Energy prices are low. The yield curve started to steepen about a year ago. All these things indicate to me that we are throwing so much [stimulus] at this recession that we're going to get some growth next year, probably starting by the second quarter."
A panel of respected economists last week declared that the recession began last March, when the economy technically was still growing, and is likely to last until next March. The current downturn - aggravated by the impact of the terrorist attacks in September - follows a 10-year period of continual, job creating growth. That period of prosperity was the longest in U.S. history, during which over 17-million new jobs were created, and growth averaged three-percent annually. In recent months, job losses have become the norm with 400,000 people losing their jobs in October alone.